Houses at Westhafen in Frankfurt am Main: Investors unsettled

Photo: DPA

After years of boom, real estate prices in Frankfurt am Main have now made it almost impossible to buy a home, even for high earners. Interest rates are also contributing to the decline in demand. As a result, prices are falling noticeably. And according to brokers and financiers, Hesse's largest city is more affected by the development than the other major cities in Germany.

For example, the real estate agent Von Poll observes the most significant price decline in Frankfurt am Main. Similar to Munich, the city has a very high price level for residential real estate, says Daniel Ritter, managing partner at Von Poll. "Now, due to the rise in mortgage interest rates, prospective buyers have to recalculate – they are waiting and negotiating more." This has a greater influence on the percentage price development than in Berlin, for example.

In addition, the market for high-rise residential buildings, which are particularly well represented in Frankfurt, has become more difficult, says Ritter. The risks and increased ancillary housing costs are difficult for investors and prospective buyers to calculate. Currently, more apartments from high-rise residential buildings are coming onto the real estate market.

Major broker Jones Lang LaSalle (JLL) expressed a similar view. "According to our analyses, the purchase prices of condominiums in Frankfurt in the first quarter fell most significantly year-on-year compared to the other top 7 cities." However, the discount in the offer prices is only slightly greater than in Munich and Düsseldorf. Due to the noticeable drop in the number of new buildings, other factors could have a greater impact on prices than usual: "For example, the fact that international buyers, who are traditionally particularly active in Frankfurt, are currently holding back." Investors are relatively well represented in the city, so that the cooling in the transaction market is having a particular impact here, explains JLL.

According to the Association of German Pfandbrief Banks (vdp), prices for residential real estate in Frankfurt fell by 6.4 per cent in the first quarter compared to the same period last year – more than in Hamburg, Düsseldorf, Cologne, Stuttgart and Munich with discounts of between 2.3 and 3.8 per cent. In Berlin, prices rose slightly. Already in the fourth quarter, there had been an above-average price decline in Frankfurt, according to the vdp, which represents Germany's most important real estate financiers.

And the real estate specialist CBRE recently reported that the real estate investment market in Frankfurt collapsed by 92 percent to a volume of 201 million in the first quarter. This is the weakest result among Germany's top 5 locations.

"For a long time, Frankfurt was undervalued compared to other cities when it came to real estate prices," says Till-Fabian Zalewski, head of the broker Engel & Völkers for the Germany, Austria and Switzerland region. This changed between 2014 and 2021. The recent decline in price peaks is mainly due to private buyers who are waiting because of the rise in interest rates. However, residential real estate in major cities remained in demand.